QUESTION 3 [22 MARKS]

Fairvalue Ltd is a wholesale distribution firm which has provided you with the following

information from stores in relation to a particular product line - CRIS20

Dates Details Units Unit Price (BWP) Value(BWP)

08/3/12 Delivery from Manufacturer 500 10 5,000

12/3/12 Delivery from Manufacturer 100 11.20 1,120

17/3/12 Issued to sales 400

25/3/12 Delivery from Manufacturer 300 11.50 3,450

27/3/12 Issued to sales 250

Sales of 650 units @ P20 per item are recorded for the month. There is an opening stock of 250

units, valued at P2 000 at 1st March 2012.

Required:

a. Calculate the gross profit for the month of March 2012 using each of the following methods of inventory valuation:

(i) FIFO. (6 marks)

(ii) LIFO. (6 marks)

(iii) Weighted average. (6 marks)

b. Explain which inventory valuation is most relevant for decision making purposes. (4 marks)